China's Toutiao is buying Musical.ly in a deal worth $800M-$1B

Musical.ly, the lip-syncing app popular with teens and young people, has been sold to Chinese social media giant Toutiao, according to an announcement made today.

Musical.ly, the lip-syncing app popular with teens and young people, has been sold to Chinese social media giant Toutiao, according to an announcement made today.

The deal is undisclosed by sources tell TechCrunch that Bytedance, the company behind China's top news aggregator service Toutiao, will pay between $800 million and $1 billion to buy Musical.ly, which claims 60 million users most of whom are based in the U.S..

Three-year-old Musical.ly was previously valued at $500 million when it raised its most recent round of funding in 2016. The startup said it will continue to run as an independent business within Bytedance, taking advantage of the distribution and tech that its new parent offers.

Toutiao has become well known for its extensive use of artificial intelligence to help build a tailored newsfeed for its userbase, and in an announcement today the companies said that this tech will be used to develop Musical.ly's reach in terms of users and creators in China, Korea, Japan, and Southeast Asia. These are regions where the company hasn't really made a mark to date, despite the fact that its founders are Chinese and its head office is in Shanghai, but Bytedance has a growing presence in them.

In that sense, there's plenty of synergy to the deal -- which gives insight into how keen Bytedance is to expand overseas having already found huge success in the Chinese market.

At a time when investors have cooled on social media, Musical.ly stands out as a success story. There’s a commonly held view that it’s almost impossible to stand out amongst a crowded market which includes Facebook, Snapchat and Twitter. In that way, Bytedance is similar since it has emerged to become a super company in China, where Baidu, Alibaba and Tencent have traditionally dominated as the big three.

In Musical.ly's case, it latched onto the tween demographic and quickly developed cult fanfare. From music videos to live streaming, the platform developed a full-fledged social network, with some users becoming stars.

In the business community, Musical.ly’s success was initially under the radar. When we broke the story of its funding round 18 months ago, the startup name hardly rang a bell for most adults in Silicon Valley. The Shanghai-based company had both local and Silicon Valley investors. Greylock Partners, GGV Capital, DCM and Qiming all saw Musical.ly's promise.